A drug formulary is a list of generic and brand-name prescription drugs covered by a health plan. The health plan generally creates this list by forming a pharmacy and therapeutics committee consisting of pharmacists and physicians from various medical specialties. This committee evaluates and selects new and existing medications for what is called the (health plan’s) formulary. The selections are based on each drug’s therapeutic class, which is a group of medications known to treat a particular health condition. Antibiotics, which are commonly used to treat infections, is an example of a therapeutic class.
Prescription Drugs Not Covered by a Health Plan
Understanding your health plan’s formulary is an important part of understanding your overall benefits because your plan might only pay for medications on the “preferred” list that they’ve developed. Your health plan may exclude a drug from the formulary for several reasons, including:
- The committee selected a drug in the same therapeutic class that they’ve determined is sufficiently effective and most cost-effective for treating your condition.
- The drug is available over-the-counter.
- The FDA has not approved the drug.
- The health plan has concerns about the safety or efficacy of the drug.
- The drug is determined as medically unnecessary. (For example, the drug is used for cosmetic purposes.)
If a drug is excluded, then you may be in for a shock if you have to pay full retail cost for a prescription. Be sure to review your health plan’s formulary list to avoid any unwelcome surprises.
Keep in mind that each plan’s formulary is generally updated annually, although it is subject to change throughout the year, which could affect pricing and payment. When a medication changes tiers, you may have to pay a different amount for that medication. Medications may move to a lower tier at any time and often move to a higher tier when a generic version of the drug becomes available. Medications most commonly change tiers or become non-formulary on January 1 or July 1. Please note that all health plans have different formularies, so choose your health plan wisely and pay attention to notifications from your health plan.
What Is a Formulary Tier?
Tiers are the different cost levels health plan members pay for medications. Your employer or your health plan assigns each tier a unique cost, which is the amount you will pay when filling a prescription. Let’s use a typical health plan with four tiers to illustrate how formulary tiers usually work.
- Tier 1 (generic drugs)
- Tier 2 (preferred drugs)
- Tier 3 (non-preferred drugs)
- Tier 4 (specialty drugs)
Tier 1 medications are your lowest-cost options. If your medication is placed in Tier 2, 3 or 4 in this example, you should first check to see if there is a Tier 1 option available and discuss your options with your doctor. Understanding which drugs belong in which tiers and at what price is important because it influences if or how much you pay out-of-pocket for your medication, even if that drug is on the drug formulary. Drugs in the higher tiers are typically covered by coinsurance rather than copayment, which can lead to higher out-of-pocket costs.
Most health plan formularies have procedures to limit or restrict certain medications to encourage doctors to prescribe certain medications appropriately and save money by preventing medication overuse or abuse. Some common restrictions include:
- Prior Authorization Required: Your doctor is required to provide additional information to the health plan to determine coverage.
- Supply Limit: The amount of medication covered per copayment or in a specific time period.
- Step Therapy: A trial period with a new medication is required before that medication will be covered. Usually, the first medication is less expensive, which is why the health plan recommends you try it first.
Discuss the Formulary With Your Healthcare Provider
There are exceptions to the rules when your health plan’s formulary doesn’t include certain medications, especially when this lapse might lead you to use a less effective drug or one that could result in a harmful medical event. As a plan member, you can request coverage for a medication not listed on the formulary. If your request is denied, you can request an appeal. All health plans have an internal and external appeals process, which is required by the Affordable Care Act. The external appeals process includes impartial third-parties not employed by the plan. If your appeal is denied, you can still ask your doctor to prescribe the medication, but you would be responsible for the full charge.
You should always consult with your healthcare providers to better understand your health plan’s formulary and learn which medications are available and appropriate to treat your condition.
Bilhari, M. (2018, July 20). Understanding your health plan drug formulary: What you need to know. Very Well Health. Retrieved from https://www.verywellhealth.com/understanding-your-health-plan-drug-formulary-1738897
Davis, E. (2017, May 28). Why isn’t this prescription drug on my health plan’s drug formulary? Very Well Health. Retrieved from https://www.verywellhealth.com/why-isnt-my-rx-drug-on-my-health-plan-drug-formulary-1738477